The Beer Game :: GCSE Business Marketing Coursework

The Beer GameTo see how decisions at one part of a supply filament effect the overall performance of a system, we ran a simulation called the beer game. The supply chain consists of a retailer who orders from a distributor who orders from a wholesaler who orders from a factory. At the beginning of each period, each stage of the chain orders upstream and receives the order shipped out to them two periods ago (the order they placed 4 periods ago) unless the neighboring stage upstream is backlogged. All orders are eventually filled when inventory becomes available. The holding cost specified for each location are (in $/keg.period) factory 0.25, scattering center 0.50, warehouse 0.75, and factory 1.00. Additionally, the penalty cost for a shortage is zero for all stages except the retail stores where the penalty cost is estimated to be $10.00 per keg/period.After trying many different strategies, the best policy I was able to come up with had a total cost of $122.00. This was ac hieved using prime(prenominal) 4, the base-stock policy. This policy re-orders a specified amount, less inventory on hand and pipeline inventory. The player specifies the base stock quantity for the retailer, warehouse, distributor, and factory. When this policy was used at each point in the supply chain, the lowest cost strategy was achieved. Location Base Stock AmountCostRetail 300 101.55 storage warehouse 210 10.21Distributor 210 7.70Factory 150 3.41Total 122.87Because the retail store encounters such a high penalty for shortages, it is best to keep them well stocked. They also go the highest holding overagecost, but at $1.00 it is only 1/10 of the shortage underagecost. If the overage and underage costs were equal it would make smell out to always order enough to anticipate having the mean (50) on hand. This policy is not optimal however, when it costs the retailer more for a sho rtage than for excess.